on February 5, 2015 ZEE Borrowed Sh.50 Million through issue of 50 Million bond at par sh1000/=. The coupon rate is 10% payable annually Market interest rate is 10% The bond matures on 5 January 2030...

on February 5, 2015 ZEE Borrowed Sh.50 Million through issue of

50 Million bond at par sh1000/=.

The coupon rate is 10% payable annually

Market interest rate is 10%

The bond matures on 5 January 2030                                                                                Calculate the value of this bond.

• If after 3 years; the market interest rate falls to 5%; What would be the value of the bond?


• If interest rates are constant at 5% pa and 5 years have elapsed since initial issue date What would be the price of the bond?


• If after 3 years; the market interest rates rises to12%; What would be the value of the bond?


• If interest rates are constant at 12% pa and 5 years have elapsed since initial issue date What would be the price of the bond.


• Given the above scenarios what the relationship between the interest rate and the bond price?